From your question, it sounds like you are party to a lease-to-own home purchase agreement. This type of purchase agreement allows a buyer to begin paying toward the purchase of a home while working to improve his credit score and saving money to make a down payment on the home. At the beginning of the lease-to-own agreement, the buyer and seller will negotiate a set purchase price, an option period and an option fee. The option period is a set period of time that the buyer will be paying rent but during which he has the option to purchase the home at the pre-negotiated purchase price. A typical option period for a lease-to-own agreement is three years. The option fee is a percentage of the purchase price, usually 1% to 5%, that the buyer pays at the beginning of the lease for the privilege of having an option to purchase the home. The option fee will be applied to the purchase price of the home when the buyer purchases the home.
The monthly rent amount will also be determined at the beginning of the lease; like any other rent payment, the rent is not applied to the purchase price of the home. However, is most lease-to-own agreements, the future buyer pays a Â“rent premium,Â” which is a negotiated monthly payment in addition to the regular rent, which is applied to the purchase price of the home. If the renter is unable to buy the home by the end of the option period, he forfeits the option fee and the rent premium payments to the seller, meaning that a lease-to-own agreement can be a risky proposition for the buyer if he is not confident that he will be able to obtain financing to purchase the property before the end of the option period.
Based on your question, it sounds like you have found yourself in the situation I described aboveÂ–you have paid an option fee and rent premiums, but now are unable to find the financing you need to finalize the purchase of the home. Your credit score places you well into the sub-prime mortgage market, but that certainly does not mean that you will not be able to find a loan. However, you should expect to pay a premium in interest for any loan you receive. But given that you are facing losing a significant amount of money in fees to the homeÂ’s owner, it may be worth paying a high interest rate for the time being. Once you have purchased the home, you can work to improve your credit for a few years, then refinance the loan at a lower interest rate.
Bills.com makes it easy to compare mortgage offers and different loan types. Please visit Home Purchase Resources page at http://www.bills.com/home-purchase/ to read more about the various types of purchase loans available to consumers. You can then submit your contact information in the Bills.com Savings Center at the top of the page, and we will have several pre-screened mortgage brokers contact you to discuss the options available for your situation.
You should also start working to improve your credit score so that you can obtain a loan with better terms in the future. I encourage you to visit the Bills.com Credit Resources page at http://www.bills.com/credit/ , where we offer a wealth of information and ideas on how to improve your credit history and credit rating.
I wish you the best of luck in finding a loan that will help you purchase your home. I hope the information I have provided helps you Find. Learn. Save.